Small businesses across the US have always been the heart of the US economy, as they account for almost half of the employment in the private sector. So, when a recession coupled with the magnitude of the coronavirus pandemic envelops the US economy, the survival rate of small businesses diminishes greatly, and thus puts further downward pressure on the likelihood of a V-shaped recovery.
Although earlier lockdown measures and work-from-home orders have certainly helped reduce the spread of the virus, the impact of such measures have also had a profound effect on the health of the US economy, especially its small businesses across the country. Although many of those restrictions have since been lifted and somewhat of a rebound has ensued over the summer months, there are still a number of businesses that remain in some form of financial ruin.
According to data compiled by Opportunity Insights, the recovery among America’s small businesses has been far from uniform. In some states, the number of small businesses that reopened signal that times have returned to normal; conversely however, some regions of the US still have the majority of their businesses shuttered, and with no end in sight to the soaring number of infections the likelihood that they will remain closed grows with each passing day.
With respect to the entirety of the US, almost a quarter of all small businesses still remain closed. In fact, business closures in New Orleans and the Bay Area are nearly double the national median, while small businesses in the leisure and hospitality industry suffer the greatest of hardships with 37% reporting zero transactions. Moreover, tech companies in cities such as Austin, TX and San Francisco, CA have switched to remote offices for their employees, which is further bad news for those small businesses in the restaurant and services sector that would otherwise cater to those workers.
Furthermore, those cities that have economies heavily focused on the tourism industry, such New Orleans and Honolulu, have experienced a significantly higher rate of business closures compared to the rest of the country. However, as the pandemic continues to drag on, what appeared as only temporary business closures are slowly becoming permanent. In the meantime, for those small businesses that are still managing to remain open, their revenues are very far from pre-pandemic levels. Although it is difficult to predict when, or even if the US economy will make a full recovery, one thing is for certain: small businesses will continue to face a growing number of unprecedented circumstances in the meantime.
Information for this briefing was found via Opportunity Insights and Visual Capitalist. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.